The National Credit Act (Act 34 of 2005) was instated to ensure consumer protection and industry standards within the credit world. With guidelines and rules to ensure all is fair in debt and credit, it follows certain key features:
Its key features include:
- Specific language in credit agreements – it must be simple and understandable by all consumers.
- Quotes must be given on all credit agreements, these are binding for up to 5 days.
- Advertising and marketing of agreements must include prescribed information on the cost of credit.
- Credit sales at a person’s work or home are strictly limited.
- Reasons must be provided if the credit application is rejected.
- Automatic increases in credit limits are regulated.
- Reckless lending is prohibited.
- Interest and fees are regulated on all agreements, including micro-loans.
- Credit Bureaus are regulated, consumers have the right to one free credit check a year.
- Debt counselling must be introduced to enable restructuring of debts regarding over indebted consumers.
As credit is one of the common drivers of the capitalist system, lubricating the economy and promotes commercial activity. However, as many spend money they don’t have, take on too much debt and get caught in the debt trap, the National Credit Regulators had to be instated to be the watch dog over the industry. Ensuring fairness and consumer protection on a legal basis, this is the body that ensures all credit and debt matter are handled properly and above board.
Dealing with matters like unfair collection and reckless lending, the National Credit Act is the legal basis for consumer protection within the debt industry – promoting a fair and non-discriminatory marketplace. It is also its purpose to allow access to debt to the lower income rungs of society, allowing them to become active members of the economy.